Hello again! I hope everyone is having a terrific Sunday. For today’s post I want to discuss what I’m planning for my currently dormant TastyTrade account. If you’ve been reading any of my latest posts you’ll know that I recently dusted off my Robinhood account to join the craze of options based ETF’s. However, the recent pullback left me questioning the long term viability of those riskier assets.
As such, I decided to put together a new basket of assets that, I currently believe, will protect my capital a little better. Only time will tell of course but if history is any indication then the prospects seem at least better than the collection of options ETF’s I’m playing in Robinhood.
Let’s break it all down…
Agenda
- Identify Alternative High Yield Investments
- Investment Plan
- Expectations
- Investments across all of my accounts
Alternative High Yield Investments
Let’s start by identifying the assets I’ve come up with for this alternative high yield investments account. I started by creating a scan on ThinkorSwim with 2 criteria. The assets must yield more than 5% and the average volume must be greater than 100K. I searched all available symbols and returned a list of nearly 400 different assets ranging in price from as low as $1 to as high as $200. Further, I didn’t exclude higher priced assets but still virtually every one of them traded under $100 and most under $20 per share.
Lastly, the only criteria other than those listed above was that I wanted to see an upward sloping price chart on the maximum monthly chart. As long as they were growing over the years, I was happy. That said, here is the resulting list.
- EOI – Closed end fund
- EOS – Closed end fund
- ETG – Closed end fund
- FSCO – Closed end fund – Financials
- BXSL – Closed end fund – Financials
- OBDC – Financials
- ARCC – Financials
- ARLP – Energy
- FDUS – Closed end fund – Financials
- HTGC – Financials
- EPD – Energy
As you can see, this list is heavily entrenched in the financial and energy sectors. However, the closed end funds above invest similar to an ETF which does provide for more diversification. Is it enough? Who really knows. Will it produce strong yields? I believe it will.
Alternative High Yield Investments Plan
With the assets identified I now need to determine how I’m going to allocate my capital and contribute to this account. First, I should say this, I’m not planning on ever selling these assets. The only reason I would is if the yield fell to an unacceptable level for some reason other than a higher share price. That, I would of course accept.
You may recall, I’m using my Robinhood account to provide vacation money or simply “fun money”. For this account, going forward my “Tastytrade account”, I’m hoping to use the resulting income for life’s upkeep expenses. For example, new computers, home improvement items, truck maintenance, etc. All those items that are typically undesired and occur without warning. A sort of emergency fund, if you will. Although, now that I think about it, I may want to re-visit my actual emergency fund to do something with some of that cash.
In any case, the income will just be reinvested until the average monthly return matches what I’m currently investing. For now, I’m going to invest $50 a week, similar to my Robinhood account, but If monthly expenses allow I will up that amount to $100 a week to shorten my contribution horizon. In bullet format, here’s my plan.
- $2,500 Initial investment
- Buy 2 shares of each company each week until initial capital is deployed
- Buy 1 share of each company per month, minimum
- Reinvest dividends into nearest ex-dividend asset
Alternative High Yield Investments Expectations
The plan is in place and the capital is ready to be deployed. With some rudimentary Excel work I was able to create the following graph and resulting charts to highlight what I’d like to see happen over the next few years.
You’ll notice, as discussed in the plan section above, I was able to stop contributions after 7 years with the monthly income exceeding my contribution amount. I may also increase the contribution to $4,800 a year or to some level higher than the $2,400 indicated which would ultimately allow me to stop contributing capital far sooner. For example, contributing $100 a week instead of $50 per week would allow me to forgo contributions in year 4 rather than year 7.
Here are some graphs of the above data for those more visually inclined.
Diversified Investment Strategies
Now that you’ve seen what I’m planning for my Tastytrade account I think it makes sense to calm your anxiety by sharing what I’m doing in all of my accounts. This will be a synopsis for now as I’m planning a full post to share more details later. However, after reading several of my latest posts I’m sure you’re wondering if I’ve lost every marble. After all, with 20 years more to invest I should probably be prioritizing growth over income at this stage.
Worry not, I’m doing that with the lion’s share of my invested capital. Here are my various accounts along with some general details and the current account holdings.
Roth IRA Account
Inside my Roth I’m heavily focused on growth and dividend growth. My current holdings of various weightings include; MSFT, SGOV, KO, SPLG, SCHD, TXRH, O, WMT, V, MCD, BND, WM, GOOG, AFL, CP, AMZN, CVX, XLU, PFE, DELL, JNJ, MKC, CMCSA. I’ve tried to diversify across multiple sectors and industries. The largest holdings in the account are MSFT, SPLG, & SCHD. Which effectively provides for exposure to a high growth stock (MSFT), the overall market (SPLG), and a respected dividend payer/grower (SCHD).
Brokerage Account
Inside my standard reg-T margin account I’ve simplified the approach down even further which you may recall from a recent post, “My Taxable 5 Fund Portfolio”. The approach is largely the same only I’ve eliminated any individual stocks and focused on well known ETF’s instead. Additionally, I’ve avoided any complicated investment approach. I simply maintain an equal weight of each asset and try to buy a share or two each week. Currently I’m holding; SGOV, SCHD, DGRO, SPLG, & QQQM. I’m only holding SGOV in this account for two reasons. One, I didn’t want to lump sum invest into each of the assets. Two, my account is being transitioned away from TD and I wanted to wait for that to conclude before I started contributions again.
This portfolio is focused on the following investment objectives; 1. Growth (QQQM), 2. Market Perform (SPLG), 3. Dividend Growth (DGRO), and 4. Dividend Yield/Growth (SCHD).
Robinhood Account
For more detail surrounding my Robinhood Account plan, you may also want to view this post, “Replacing my HYSA with Covered Call ETF’s”. In short, my plan is similar to the approach discussed here for my Tastytrade account. Contribute a relatively small amount of capital and have that eventually provide the money I would need to go on vacation. I really enjoy taking a vacation each year but if things go well with this account I wouldn’t be upset taking many more.
The portfolio is focused solely on high yield through Options ETF’s. The current holdings are; ISPY, JEPI, JEPQ, SPYI, PFRL, YMAX, YMAG, IVVW, FEPI, & QQQI. All of which are currently lower than my entry price but I’ve only been running that account for about a month so check back later as I’ll be posting income updates periodically. Lastly, as of today, this account has an average yearly yield of 17.83%.
TastyTrade Account
The primary focus of this entire post is what I’m planning on doing with my Tastytrade account. To simplify it further, for those that may have somehow ended up reading this but not the preceding post, I’m focusing on yield but safely. If that makes sense. It almost seems oxymoronic to say that but alas, that’s the plan.
I don’t currently hold any of the above mentioned assets but will throughout the next month. The objective is to protect the principal balance with higher quality dividend payers as opposed to the outright high yielding Robinhood portfolio. As of today, investing in each of the above assets would return an average yearly yield of 10.07%.
Closing Thoughts
There you have it. My alternative high yield investments plan and as a bonus a brief look at my entire investment approach. Until recently my focus had only been on growth and/or dividend growth. Which is still the primary focus but in an attempt to cover costs sometime in my future, I thought now would be an ideal time to start these ancillary accounts.
For now, they have a specific purpose, vacations or unforeseen expenses. But who knows, in the future they may just be an additional $1000 or more per month I have at my disposal.
God bless,
Jeff